A recent REASON magazine article asked:
quote:Can America really reduce its debt and deficit without raising taxes to job-killing rates or cutting essential services to developing-world levels? The answer is not simply yes, it's that we have to.
Yes, we have to...according to the National Commission on Fiscal Responsibility and Reform report the annual deficit is 9% of GDP at $1.4 Trillion. The federal debt is a whopping 62% of GDP and if we keep our blinders on, and keep going the debt will exceed the entire economy by 2025.
Or as the report says: "America's long-term fiscal gap is unsustainable".
The crazy and ironic thing, the report recommends what seems to be very mild solutions...that Congress "hold spending in 2012 equal to or lower than spending in 2011," "return spending to pre-crisis 2008 levels in real terms in 2013," and "limit future spending growth to half the projected inflation rate through 2020."
If congress would adhere to these very mild spending restrictions our gigantic, bloated, and over bearing federal government could continue on.
But even these "mild" solutions will never be considered, because politicians and special interest groups start throwing around terms like "draconian", "destroy", "old people suffer", and "children die", etc when it is suggested that various agencies and programs do with a 4% increase instead of 5% over 10 years. Please note the report is NOT suggesting cutting programs or budgets...but cutting the INCREASE.
The following graph has been posted by others before. It seems to be an economic truth. Progressives want to raise taxes on the "rich" to get us out of debt, but not only is raising taxes bad policy it's also very hard to get sustained revenue by doing so...Federal government tax revenues have been at 18% of GDP for over 60 years despite jacking up or cutting the income tax rate:
Solution seems to be pretty much common sense, the government needs to keep it's spending at 18% of GDP. But as we know, there's a shortage of common sense in DC.
The CBO offers a pretty good solution. They have produced a long term budget with the Bush tax cuts staying in place. Over the next decade: "government revenues would remain at about 19 percent of GDP, near their historical averages."
quote:A balanced budget in 2020 based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.
Once again notice the article mentions "not even absolute cuts, but trims from expected increases in spending"...We are talking about a 3.6% cut each year to get balanced in 10!
Are we really going to give serious consideration to a politician or special interest group that says a frikin' 3.6% cut is "outrageous"?
And I hate to repeat myself...but remember a "cut" in DC is not really a cut, it's a cut in the increase...
The article concludes:
quote:Are our leaders willing and able to identify and cut just $25 billion in waste and excess out of more than $700 billion in non-defense discretionary spending? Is reducing the $714 billion the Department of Defense received in 2010 by a paltry $25 billion impossible? Can Medicare and Medicaid, two programs that are infamous for waste and fraud and cost well over $720 billion in 2010, find $35 billion in efficiences? The specific cuts should be open to negotiation, but the historical record shows that the available level of government revenue is fixed.
If these sorts of small but systematic trims are impossible over the next decade, then really nothing is possible and debt, deficits, and despair are here to stay.